Rising car prices and longer loan terms have reshaped the economics of car ownership in the United States. A recent study by LendingTree shows that while most borrowers are keeping up with their auto loans, a meaningful share is falling behind, revealing deeper trends in affordability and credit risk across the country.
According to the analysis, 1.99 percent of Americans with recently active auto loans have a default on record.
The findings are based on a review of roughly 162,000 anonymized credit reports from LendingTree users collected between Oct. 1 and Dec. 31, 2025. A default in the study includes loans that are 90 days or more past due, charged off, sent to collections, or repossessed.
While the national rate appears relatively modest, the report highlights a clear pattern in who defaults, when they default, and where defaults are most concentrated.
The Typical Borrower Who Defaults
The data shows that borrowers who default on auto loans tend to share several common characteristics. On average, consumers with defaulted auto loans have a monthly payment of about $540 and originally borrowed around $24,223 to finance their vehicle.
Loan structure also plays an important role. The average default occurs 42 months into a loan with a typical term of 69 months, meaning many borrowers encounter problems well after the early repayment period.
Long loan terms are particularly common among defaulted borrowers. The study found that 61.9 percent of people who defaulted had loan terms of 72 months or longer, reflecting the industry’s growing reliance on extended financing periods to keep monthly payments manageable as vehicle prices climb.
For many households, a payment in the $500 range is already a stretch. Financial pressures such as rising living costs, unexpected expenses, or employment changes can quickly make an auto loan unaffordable.
Credit Scores Play a Decisive Role
One of the clearest findings in the study is the connection between credit scores and default risk. Auto loan defaults are overwhelmingly concentrated among borrowers with the weakest credit profiles.
According to the analysis:
- 83.7 percent of borrowers with defaulted loans are deep subprime, with credit scores below 580.
- 11.1 percent fall into the subprime range of 580 to 619.
- 3.6 percent are near prime, with scores between 620 and 659.
- 1.4 percent are prime borrowers, while just 0.2 percent are super prime with scores above 720.
Overall, the average credit score among borrowers who defaulted was 529, highlighting the financial vulnerability of this group. Borrowers with lower scores typically face higher interest rates and fewer lending options, which can make repayment more difficult over time.
Defaults Tend to Occur Later in The Loan Cycle
Contrary to what some might expect, auto loan defaults rarely occur immediately after a loan is issued.
Only 8.7 percent of defaults occur within the first year of the loan. The highest share appears between two and four years after origination, which accounts for 36.7 percent of defaults.
This timing reflects how financial strain often builds gradually. Borrowers may initially manage payments, but rising expenses or economic disruptions can create problems later in the loan cycle.
Geographic Differences Across the U.S.
The study also highlights significant differences in default rates from state to state.
Louisiana ranks highest in the nation, with 5.00 percent of auto borrowers having a default on record. That rate is more than double the national average. West Virginia follows at 4.59 percent, while New Mexico ranks third at 4.31 percent. Mississippi and Arkansas round out the top five.
At the opposite end of the spectrum, Minnesota has the lowest default rate at 1.05 percent, followed by Utah at 1.13 percent and Massachusetts at 1.20 percent.
These regional variations often reflect broader economic conditions, including income levels, employment stability, and access to credit.
A Signal for The Auto Financing Market
Although fewer than two percent of borrowers have defaulted, the patterns identified in the report offer insight into the pressures facing the modern auto financing market.
Rising vehicle prices, extended loan terms, and higher interest rates have made auto ownership increasingly expensive. For borrowers with weaker credit profiles, even a modest monthly payment can become difficult to sustain.
The findings suggest that while the overall market remains stable, subprime borrowers and long-term loans represent the areas where financial risk is most concentrated. For lenders, dealers, and policymakers, the data underscores how the structure of auto financing continues to shape affordability for millions of drivers.
Sources: Lending Tree